Before dwelling into the concept of the term finance, we should track its origination to have clarity on its meaning. Derived from the lat in and the old French word, finance meant ‘end’, but subsequently by the 18th century the word became synonymous with management of money. However with passing time, finance has evolved much beyond just mere management of money.
Form being part of economics earlier, finance has gained much popularity and attention as an important discipline of academics, being one of the most vital areas of focus for students from commerce and management studies.
Finance primarily relates to cash and funds and involves transaction pertaining to sourcing of such funds from different venues and optimum and efficient application of such obtained finance to meet the underlying purpose. Finance acts as a resource in all kinds of financial transactions and involves financial management and financial decision making.
Financing and investing are two facets of finance which has its distinctive categorization and significance.
- Financing: this is concerned with the procurement and sourcing activities for any individual or group level. The capital resources accumulated is determined by the needs and purpose of the individual or group. However managing such resources plays imperative role. Important decisions to be taken for financing activities are the type of finance one needs, the size of capital required and lastly the composition in case there are more than one medium for procuring capital.
- Investing: this aspect relates to putting the finances to optimum use in tandem with the overall objective. It’s imperative to identify the purpose of making investments. In order to apply the available resources to generate maximum benefit, one must carefully select the type of investment or financial asset, the quantum of capital investments and also the correct mix of such investments across the asset base in order to mitigate any risk factor and generate maximum profits.
The growing relevance of finance and its functions in all human activities, whether for reasons personal, commercial or social, a thorough understanding and study is required to successfully fulfill the purpose of financial management at all levels. The evolving complexity to matter pertaining to capital resources, their procurements, utilization and successful mobilization has become a matter of concern in today’s era and therefore needs expert guidance and tutorials.
Finance as a discipline is a vast area of study and includes numerous topics under its domain which are discussed in details in our website.